Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Question
Consider a 20-year, $180,000 mortgage with a rate of 6.3 percent. Four years into the mortgage, rates have fallen to 5 percent. Suppose the transaction cost of obtaining a new mortgage is $1,900. a. Should the homeowner refinance at the lower rate? Yes No b. Quantify the effect of the homeowner's decision. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Answer is complete but not entirely correct. Monthly savings S 92.33
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Transcribed Image Text:Consider a 20-year, $180,000 mortgage with a rate of 6.3 percent. Four years into the mortgage, rates have fallen to 5 percent. Suppose the transaction cost of obtaining a new mortgage is $1,900. a. Should the homeowner refinance at the lower rate? Yes No b. Quantify the effect of the homeowner's decision. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Answer is complete but not entirely correct. Monthly savings S 92.33
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